-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VfEa73Q7+NbS94ufrmA4/H4Q/ndD+tOFYB8jpF8UIZFDEwNIDWI5e1GETLBXIbc2 aSKHKIOvWAj2Dvv3dDIQww== 0000897069-99-000214.txt : 19990406 0000897069-99-000214.hdr.sgml : 19990406 ACCESSION NUMBER: 0000897069-99-000214 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19990405 GROUP MEMBERS: ALLIANT INDUSTRIES, INC. GROUP MEMBERS: IES INVESTMENTS INC. GROUP MEMBERS: INTERSTATE ENERGY CORP GROUP MEMBERS: INTERSTATE POWER COMPANY SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MCLEODUSA INC CENTRAL INDEX KEY: 0000919943 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 421407240 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-46203 FILM NUMBER: 99587233 BUSINESS ADDRESS: STREET 1: 6400 C ST SW STREET 2: PO BOX 3177 CITY: CEDAR RAPIDS STATE: IA ZIP: 52406-3177 BUSINESS PHONE: 3193640000 MAIL ADDRESS: STREET 1: 6400 C ST SW STREET 2: PO BOX 3177 CITY: CEDAR RAPIDS STATE: IA ZIP: 52406-3177 FORMER COMPANY: FORMER CONFORMED NAME: MCLEOD INC DATE OF NAME CHANGE: 19960403 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: INTERSTATE ENERGY CORP CENTRAL INDEX KEY: 0000352541 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 391380265 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 222 WEST WSHNGTON AVENUE CITY: MADISON STATE: WI ZIP: 53703 BUSINESS PHONE: 6082523110 MAIL ADDRESS: STREET 1: P O BOX 2568 CITY: MADISON STATE: WI ZIP: 53701-2568 FORMER COMPANY: FORMER CONFORMED NAME: WPL HOLDINGS INC DATE OF NAME CHANGE: 19920703 SC 13D/A 1 SCHEDULE 13D AMENDMENT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 1)* McLeodUSA Incorporated (Name of Issuer) Class A Common Stock (Title of Class of Securities) 582266 10 2 (CUSIP Number) Edward M. Gleason Interstate Energy Corporation 222 West Washington Avenue, Madison, Wisconsin 53703 (608) 252-3311 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 21, 1998 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|. Check the following box if a fee is being paid with the statement |_|. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d- 1(a) for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that Section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 19 Pages Exhibit Index is on Page 19 - --------------------------- ------------------------ CUSIP No. 582266 10 2 Page 2 of 19 Pages - --------------------------- ------------------------ ================================================================================ 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Interstate Energy Corporation - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* 00 (See Item 3) - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Wisconsin - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES -------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY 10,323,288 (See Item 5) OWNED BY -------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 PERSON -------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH 10,323,288 (See Item 5) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,323,288 (See Item 5) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| Not Applicable - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.99% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO ================================================================================ *SEE INSTRUCTIONS BEFORE FILLING OUT! - --------------------------- ------------------------ CUSIP No. 582266 10 2 Page 3 of 19 Pages - --------------------------- ------------------------ ================================================================================ 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Alliant Industries, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Wisconsin - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES -------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY 10,278,288 (See Item 5) OWNED BY -------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 PERSON -------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH 10,278,288 (See Item 5) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,278,288 (See Item 5) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| Not Applicable - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.92% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO ================================================================================ *SEE INSTRUCTIONS BEFORE FILLING OUT! - --------------------------- ------------------------ CUSIP No. 582266 10 2 Page 4 of 19 Pages - --------------------------- ------------------------ ================================================================================ 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON IES Investments Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| Not Applicable - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Iowa - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES -------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY 10,278,288 (See Item 5) OWNED BY -------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 PERSON -------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH 10,278,288 (See Item 5) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,278,288 (See Item 5) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| Not Applicable - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.92% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO ================================================================================ *SEE INSTRUCTIONS BEFORE FILLING OUT! - --------------------------- ------------------------ CUSIP No. 582266 10 2 Page 5 of 19 Pages - --------------------------- ------------------------ ================================================================================ 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Interstate Power Company - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| Not Applicable - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES -------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY 45,000 (See Item 5) OWNED BY -------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 PERSON -------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH 45,000 (See Item 5) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 45,000 (See Item 5) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| Not Applicable - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) .07% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO ================================================================================ *SEE INSTRUCTIONS BEFORE FILLING OUT! Item 1. Security and Issuer This statement relates to the Class A Common Stock, $.01 par value, of McLeodUSA Incorporated, a Delaware corporation (the "Company"), whose principal executive offices are located at 6400 C Street SW, P.O. Box 3177, Cedar Rapids, Iowa 52406-3177. Item 2. Identity and Background This statement is filed on behalf of the following entities: (1) Interstate Energy Corporation, a Wisconsin corporation formerly known as WPL Holdings, Inc. ("IEC"), whose principal executive offices are located at 222 West Washington Avenue, Madison, Wisconsin 53703. IEC is a registered public utility holding company with both utility (including electric and natural gas) and nonutility (including energy-related, transportation and real estate development) businesses. (2) Alliant Industries, Inc., a Wisconsin corporation and wholly-owned subsidiary of IEC ("Alliant"), whose principal executive offices are located at 222 West Washington Avenue, Madison, Wisconsin 53703. Alliant is the holding company for all nonutility businesses of IEC. Alliant's subsidiaries are engaged in business development in environmental and engineering services, affordable housing and energy services and energy-related, transportation and real estate development businesses. (3) IES Investments Inc., an Iowa corporation and direct wholly-owned subsidiary of Alliant and indirect wholly-owned subsidiary of IEC ("IES Investments"), whose principal executive offices are located at Alliant Tower, 200 First Street, S.E., Cedar Rapids, Iowa 52401. The principal business of IES Investments is to invest in, develop and/or manage investment and financial business ventures. (4) Interstate Power Company, a Delaware corporation and subsidiary of IEC ("IPC"), whose principal executive offices are located at 1000 Main Street, P.O. Box 769, Dubuque, Iowa 52004. IPC is an operating public utility engaged in the generation, purchase, transmission, distribution and sale of electricity. IPC also engages in the distribution and sale of natural gas. (a)-(c) and (f) The name, business address, present principal occupation or employment, citizenship and the name, principal business and address of any corporation or other organization in which such employment is conducted of each executive officer and director of IEC, Alliant, IES Investments and IPC, respectively, is set forth below. INTERSTATE ENERGY CORPORATION (IEC) Each of the directors and executive officers of IEC is a citizen of the United States of America. The business address of each of the directors and executive officers of IEC is 222 West Washington Avenue, Madison, Wisconsin 53703, except as otherwise indicated. -6- Name/Address Title ------------ ------ Executive Officers Erroll B. Davis, Jr. President and Chief Executive Officer William D. Harvey Executive Vice President-Generation Thomas M. Walker Executive Vice President and Chief Financial Officer Michael R. Chase Executive Vice President-Corporate 1000 Main Street Services P.O. Box 769 Dubuque, Iowa 52004 James E. Hoffman Executive Vice President-Business Alliant Tower Development 200 First Street, S.E. Cedar Rapids, IA 52401 Eliot G. Protsch Executive Vice President-Energy Delivery Alliant Tower 200 First Street, S.E. Cedar Rapids, IA 52401 Barbara J. Swan Executive Vice President and General Counsel Pamela J. Wegner Executive Vice President-Corporate Services John E. Ebright Vice President-Controller Edward M. Gleason Vice President-Treasurer and Corporate Secretary Directors Alan B. Arends Chairman of the Board of Directors of P.O. Box 1206 Alliance Benefit Group Financial Services Albert Lea, MN 56007 Corp., an employee benefits company Erroll B. Davis, Jr. President and Chief Executive Officer of IEC Rockne G. Flowers Chief Executive officer of Nelson P.O. Box 600 Industries, Inc., a muffler filler, Stoughton, WI 53589 industrial silencer, and active sound and vibration control technology and manufacturing firm -7- Name/Address Title ------------ ------ Joyce L. Hanes Director and Chairman of Midwest 15936 310th Street Wholesale Inc. Mason City, IA 50401 Lee Liu Chairman of the Board of IEC Alliant Tower 200 First Street, S.E. Cedar Rapids, IA 52401 Katharine C. Lyall President, University of Wisconsin University of Wisconsin System System, Madison, Wisconsin 1720 Van Hise Hall 1220 Linden Drive Madison, WI 53706 Arnold M. Nemirow Chairman, President and Chief Executive P.O. Box 1028 Officer of Bowater, Inc., a pulp and Greenville, SC 29602 paper manufacturer. Milton E. Neshek Special Consultant to the Kikkoman 1335 Geneva National Avenue, Corporation, and General Counsel, North Secretary and Manager, New Market Lake Geneva, WI 53147 Development, Kikkoman Foods, Inc., a food products manufacturer Jack R. Newman Partner of Morgan, Lewis & Bockius, an Morgan, Lewis & Bockius international law firm 1800 M Street NW Washington, DC 20036 Judith D. Pyle Vice Chair of The Pyle Group, a The Pyle Group financial services company 3500 Corben Court Madison, WI 53704 Robert D. Ray Retired President and Chief Executive 300 Walnut Street Officer of IASD Health Services Inc., an Suite 807 insurance firm Des Moines, IA 50309 David Q. Reed Independent practitioner of law Mark Twain Tower Suite 1210 106 West 11th Street Kansas City, Missouri 64105 -8- Name/Address Title ------------ ------ Robert W. Schlutz President of Schlutz Enterprises, a Schlutz Enterprises diversified farming and retailing business 14812 N. Avenue P.O. Box 269 Columbus Junction, Iowa 52738 Wayne H. Stoppelmoor Vice Chairman of the Board of IEC 1000 Main Street P.O. Box 769 Dubuque, IA 52004 Anthony R. Weiler Senior Vice President, Merchandising, Heilig-Meyers Company for Heilig-Meyers Company, a national 12560 West Creek Parkway furniture retailer Richmond, Virginia 23230 ALLIANT INDUSTRIES, INC. (ALLIANT) Each of the directors and executive officers of Alliant is a citizen of the United States of America. The business address of each of the directors and executives officers of Alliant is 222 West Washington Avenue, Madison, Wisconsin 53703, except as otherwise indicated. Name/Address Title ------------ ------ Executive Officers Erroll B. Davis, Jr. Chief Executive Officer James E. Hoffman President Alliant Tower 200 First Street, S.E. Cedar Rapids, IA 52401 Claire Fulenwider Vice President-Business Development & Planning Thomas L. Aller Vice President Alliant Tower 200 First Street, S.E. Cedar Rapids, IA 52401 John E. Ebright Vice President-Controller Edward M. Gleason Vice President-Treasurer & Corporate Secretary -9- Name/Address Title ------------ ------ Directors The directors of Alliant are the same as the directors of IEC (see above). IES INVESTMENTS INC. (IES INVESTMENTS) Each of the directors and executive officers of IES Investments is a citizen of the United States of America. The business address of each of the directors and executive officers of IES Investments is Alliant Tower, 200 First Street, S.E., Cedar Rapids, IA 52401, except as otherwise indicated. Name/Address Title ------------ ------ Executive Officers James E. Hoffman President Thomas L. Aller Vice President Edward M. Gleason Treasurer and Secretary 222 West Washington Avenue Madison, WI 53703 Directors Erroll B. Davis, Jr. President and Chief Executive Officer of 222 West Washington Avenue IEC Madison, WI 53703 James E. Hoffman President of IES Investments Thomas L. Aller Vice President of IES Investments INTERSTATE POWER COMPANY (IPC) Each of the directors and executive officers of IPC is a citizen of the United States of America. The business address of each of the directors and executive officers of IPC is 1000 Main Street, P.O. Box 769, Dubuque, IA 52004, except as otherwise indicated. -10- Name/Address Title ------------ ------ Executive Officers Erroll B. Davis, Jr. Chief Executive Officer 222 West Washington Avenue Madison, WI 53703 Michael R. Chase President Barbara J. Swan Executive Vice President and General 222 West Washington Avenue Counsel Madison, WI 53703 Pamela J. Wegner Executive Vice President-Corporate 222 West Washington Avenue Secretary Madison, WI 53703 Dean E. Ekstrom Vice President-Sales and Services Alliant Tower 200 First Street, S.E. Cedar Rapids, IA 52401 Dale R. Sharp Vice President Engineering & Standards John E. Ebright Vice President-Controller 222 West Washington Avenue Madison, WI 53703 Edward M. Gleason Vice President-Treasurer & Corporate 222 West Washington Avenue Secretary Madison, WI 53703 Directors The directors of IPC are the same as the directors of IEC (see above). (d)-(e) During the last five years neither IEC, Alliant, IES Investments nor IPC and, to the best of their knowledge, none of their respective executive officers and directors named above, (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. -11- Item 3. Source and Amount of Funds or Other Consideration On April 21, 1998, the three-way business combination (the "Merger") between WPL Holdings, Inc., a holding company incorporated under the laws of the State of Wisconsin ("WPLH"), IES Industries Inc., a holding company incorporated under the laws of the State of Iowa ("IES Industries"), and IPC, was consummated in accordance with the terms of an Agreement and Plan of Merger, dated as of November 10, 1996 (as amended on May 22, 1996 and August 16, 1996) by and among WPLH, IES Industries and IPC, among others. In the Merger, WPLH, as the surviving holding company, changed its name to Interstate Energy Corporation and is currently doing business as Alliant Corporation. IEC is now the parent holding company of Wisconsin Power and Light Company, IES Utilities Inc., IPC and Alliant. Following the Merger, IES Investments, which prior to the Merger was an indirect wholly-owned subsidiary of IES Industries, continued as an indirect wholly-owned subsidiary of IEC as the surviving holding company. As a result of the Merger, IEC may be deemed to beneficially own the shares of the Company's Class A Common Stock held by IPC and IES Investments. IPC and IES Investments continue as the record holders of such shares following the Merger. Item 4. Purpose of Transaction Shares of the Company's Class A Common Stock were acquired by IEC as a result of the Merger. IES Investments and IPC acquired the shares for investment purposes. The acquisitions were made prior to and not in connection with the Merger. Item 5. Interest in Securities of the Issuer (a)-(b) As of October 31, 1998, IES Investments beneficially owned 10,278,288 shares of the Company's Class A Common Stock, which represents approximately 15.92% of the outstanding shares of the Company's Class A Common Stock. Alliant, as the direct parent corporation of IES Investments, may be deemed to beneficially own the shares of the Company's Class A Common Stock beneficially owned by IES Investments. As of October 31, 1998, IPC beneficially owned 45,000 shares of the Company's Class A Common Stock, which represents approximately .07% of the outstanding shares of the Company's Class A Common Stock. IEC, as the parent holding company of IES Investments and IPC, may be deemed to beneficially own the shares of the Company's Class A Common Stock beneficially owned by IES Investments and IPC, all of which constitutes 10,323,288 shares of the Company's Class A Common Stock (approximately 15.99% of the outstanding shares of the Company's Class A Common Stock). Each of the executive officers and directors of IEC, Alliant, IES Investments and IPC beneficially owns the aggregate number of shares of the Company's Class A Common Stock set forth below after his or her name. Except as indicated in the footnotes, the persons listed below have sole voting and investment power over the shares beneficially owned. The shares -12- held by each of the persons listed below represent less than 0.10% of the outstanding shares of the Company's Class A Common Stock. Number of Shares of Class A Name Common Stock Beneficially Owned ---- ------------------------------- Thomas L. Aller 1,825(1) Alan B. Arends 200 Michael R. Chase 500 Erroll B. Davis, Jr. 1,000 John E. Ebright 1,100(2) Dean E. Ekstrom 0 Rockne G. Flowers 0 Claire Fulenwider 0 Edward M. Gleason 0 Joyce L. Hanes 0 William D. Harvey 0 James E. Hoffman 250 Lee Liu 46,575(3) Katharine C. Lyall 0 Arnold M. Nemirow 0 Milton E. Neshek 0 Jack R. Newman 1,291(4) Eliot G. Protsch 500 Judith D. Pyle 0 Robert D. Ray 1,000 David Q. Reed 600 Robert W. Schlutz 5,050 Dale R. Sharp 0 Wayne H. Stoppelmoor 500 Barbara J. Swan 0 Thomas M. Walker 0 Pamela Wegner 0 Anthony R. Weiler 0 - -------------------- (1) Includes 475 shares held by Mr. Aller's wife and 200 shares held by his daughter. (2) Represents shares held by Mr. Ebright's wife. (3) Includes 7,200 shares held by Mr. Liu's wife and options to acquire 34,375 shares. (4) Includes 41 shares held by Mr. Newman's wife. (c) See Item 4. Except as provided in Item 4, to the reporting persons' knowledge, none of the persons named in response to Item 5(a) have effected any transactions in shares of the Company's Class A Common Stock during the past sixty days. (d) Not applicable -13- (e) Not applicable Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. IES Investments, Clark E. McLeod and Mary E. McLeod, Midwest Capital Group, Inc. and MWR Investments Inc. (collectively, the "Investor Stockholders") and the Company have, with respect to the respective shares of capital stock owned by each such Investor Stockholder, entered into an investment agreement, as amended (the "Investor Agreement"), effective as of June 10, 1996, which provides that each Investor Stockholder, for so long as each Investor Stockholder owns at least 10% of the outstanding capital stock of the Company (but in no event longer than three years), shall vote such Investor Stockholder's stock and take all action within its power to: (i) establish the size of the Board of Directors of the Company at nine directors; (ii) cause to be elected to the Board of Directors of the Company one director designated by IES Investments (for so long as IES Investments owns at least 10% of the outstanding capital stock of the Company); (iii) cause to be elected to the Board of Directors of the Company one director designated by Midwest Capital Group, Inc. (for so long as Midwest Capital Group, Inc. owns at least 10% of the outstanding capital stock of the Company); (iv) cause to be elected to the Board of Directors of the Company three directors who are executive offices of the Company designated by Clark E. McLeod (for so long as Clark E. McLeod and Mary E. McLeod own at least 10% of the outstanding capital stock of the Company); and (v) cause to be elected to the Board of Directors of the Company four independent directors nominated by the Board of Directors of the Company (subject to certain exceptions). On June 14, 1997, certain shareholders of Consolidated Communications Inc. ("CCI") (collectively, the "CCI Shareholders"), the Company and the Investor Stockholders entered into a Stockholders' Agreement (as amended, the "1997 Stockholders' Agreement"), which became effective on September 24, 1997. Pursuant to the 1997 Stockholders' Agreement, which amends and restates certain agreements contained in the Investor Agreement among the parties thereto, each Investor Stockholder and the CCI Shareholders, for so long as each such party owns at least 10% of the outstanding Class A Common Stock, shall, for a period of three years after the effective date of the 1997 Stockholders' Agreement (subject to certain exceptions), vote such party's shares and take all action within its power to (i) establish the size of the Board at up to eleven directors; (ii) cause to be elected to the Board one director designated by IES (for so long as IES owns at least 10% of the outstanding Class A Common Stock); (iii) cause to be elected to the Board one director designated by MidAmerican (for so long as MidAmerican owns at least 10% of the outstanding Class A Common Stock); (iv) cause to be elected to the Board three directors who are executive officers of the Company designated by Clark E. McLeod (for so long as Clark and Mary McLeod collectively own at least 10% of the Class A Common Stock); (v) cause Richard A. Lumpkin to be elected to the Board (for so long as the CCI Shareholders collectively own at least 10% of the outstanding Class A Common Stock); and (vi) cause to be elected to the Board four non-employee directors nominated by the Board. The 1997 Stockholders' Agreement also provides that, until the earlier of the first anniversary of the effective date of the 1997 Stockholders' Agreement or March 31, 1999, and subject to certain exceptions, no Investor Stockholder or CCI Shareholder will sell or otherwise dispose of any equity securities of the Company without the consent of the Board. In addition, -14- the 1997 Stockholders' Agreement provides that if the Company grants any Investor Stockholder or CCI Shareholder the opportunity to register equity securities of the Company under the Securities Act of 1933, the Company will grant all other Investor Stockholders and CCI Shareholders the same opportunity to register their pro rata portion of the Company equity securities owned by them. The other operative provisions of the Investor Agreement remain unchanged in the 1997 Stockholders' Agreement. On November 18, 1998, the former CCI Shareholders and certain permitted transferees of such shareholders (collectively, the "Former CCI Shareholders"), the Company, IES Investments, Clark E. McLeod, Mary E. McLeod and Richard A. Lumpkin, entered into a Stockholders' Agreement (the "1998 Stockholders' Agreement"), which supersedes, as provided therein, the 1997 Stockholders' Agreement. Pursuant to the 1998 Stockholders' Agreement, IES Investments, Clark E. McLeod, Mary E. McLeod and Richard A. Lumpkin (collectively, the "Principal Stockholders"), for so long as each such party owns at least 4,000,000 shares of the Class A Common Stock, shall, for the period ending on December 31, 2001, vote such party's shares and take all action within its power to (i) establish the size of the Board at up to eleven directors; (ii) cause to be elected to the Board one director designated by IES (for so long as IES owns at least 4,000,000 shares of the Class A Common Stock); (iii) cause to be elected to the Board three directors who are executive officers of the Company designated by Clark E. McLeod (for so long as Clark and Mary McLeod collectively beneficially and continuously own at least 4,000,000 shares of the Class A Common Stock); (iv) cause Richard A. Lumpkin to be elected to the Board (for so long as the Former CCI Shareholders and Richard A. Lumpkin collectively beneficially and continuously own at least 4,000,000 shares of the Class A Common Stock); (v) cause to be elected to the Board a director nominated by the Board to replace a director designated by a Principal Stockholder, as provided above, because the director no longer can or will serve as a director; and (vi) cause to be elected to the Board up to six non-employee directors nominated by the Board. The 1998 Stockholders' Agreement provides that until December 31, 2001, IES and its affiliates will not directly or indirectly acquire any Company securities, except as permitted by the 1998 Stockholders' Agreement. The 1998 Stockholders' Agreement further provides that, until December 31, 2001, and subject to certain exceptions, no Principal Stockholder will sell or otherwise dispose of any equity securities of the Company without the consent of the Board. In addition, the Stockholders' Agreement provides that if the Company grants any Principal Stockholder the opportunity to register equity securities of the Company under the Securities Act of 1933, the Company will grant all other Principal Stockholders the same opportunity to register their pro rata portion of the Company equity securities owned by them. Certain sections of the 1997 Stockholders' Agreement are superseded on the terms contemplated in the 1998 Stockholders' Agreement. On January 7, 1999, the former CCI Shareholders and certain permitted transferees of such shareholders (collectively, the "Former CCI Shareholders"), the Company, IES Investments, Clark E. McLeod, Mary E. McLeod, Richard A. Lumpkin and M/C Investors LLC and Media/Communications Partners III Limited Partnership (collectively, the "New Stockholders"), entered into a Stockholders' Agreement (the "1999 Stockholders' Agreement"). IES Investments, the McLeods, Lumpkin and the Former CCI Shareholders are referred to collectively as the "1998 Stockholders." Pursuant to the 1999 Stockholders' Agreement, each 1998 Stockholder, for so long as each such party owns at least 4,000,000 shares of the Class A Common Stock, shall, for the period ending on December 31, 2001, vote -15- such party's shares and take all action within its power to (i) establish the size of the Board at up to eleven directors; (ii) cause to be elected to the Board one director designated by the New Stockholders (for so long as the New Stockholders own at least 2,500,000 shares of the Class A Common Stock); (iii) cause to be elected to the Board a director nominated by the Board to replace a director designated by the New Stockholders, as provided above; (iv) establish and maintain the size of the Board at up to eleven directors; and (v) cause to be elected to the Board up to five non-employee directors nominated by the Board. Pursuant to the 1999 Agreement, the New Stockholders, for so long as they collectively and continuously own at least 2,500,000 shares of Class A Common Stock, shall, for the period ending on December 31, 2001, vote their shares and take all action with their power to (i) establish and maintain the size of the Board at up to eleven directors; (ii) cause to be elected to the Board one director designated by IES Investments (for so long as IES Investments owns at least 4,000,000 shares of Class A Common Stock); (iii) cause to be elected to the Board three directors who are executive officers of the Company designated by Clark E. McLeod (for so long as Clark and Mary McLeod collectively beneficially and continuously own at least 4,000,000 shares of the Class A Common Stock); (iv) cause Richard A. Lumpkin to be elected to the Board (for so long as the Former CCI Shareholders and Richard A. Lumpkin collectively beneficially and continuously own at least 4,000,000 shares of the Class A Common Stock); (v) cause to be elected to the Board a director nominated by the Board to replace a director designated by a Principal Stockholder, as provided above, because the director no longer can or will serve as a director; (vi) cause to be elected to the Board up to five non-employee directors nominated by the Board; and (vii) cause to be elected to the Board one director designated by the New Stockholders (for so long as the New Stockholders collectively beneficially and continuously own at least 2,500,000 shares of Class A Common Stock). The 1999 Stockholders' Agreement further provides that, until December 31, 2001, and subject to certain exceptions, no New Stockholder will sell or otherwise dispose of any equity securities of the Company without the consent of the Board. In addition, the 1999 Stockholders' Agreement provides that if the Company grants any Principal Stockholder the opportunity to register equity securities of the Company under the Securities Act of 1933, the Company will grant all other Principal Stockholders the same opportunity to register their pro rata portion of the Company equity securities owned by them. The foregoing descriptions of the Investor Agreement, the 1997 Stockholders' Agreement, the 1998 Stockholders' Agreement and the 1999 Stockholders' Agreement are qualified in their entirety by reference to the Investor Agreement and 1997 Stockholders' Agreement, which were previously filed as exhibits to this Schedule and are incorporated herein by reference, and the 1999 Stockholders' Agreement and 1998 Stockholders' Agreement, which are filed as exhibits to this Schedule and are incorporated herein by reference. Item 7. Materials to be Filed as Exhibits 1. Form of Investor Agreement dated as of April 1, 1996 among the Company, IES Investments, Midwest Capital Group, Inc., MWR Investments Inc., Clark E. McLeod and Mary E. McLeod and certain other stockholders (previously filed with the Securities and Exchange Commission as Exhibit 4.8 to the Company's Form S-1 Registration Statement, as amended, dated June 7, 1996, Registration No. 333-3112 and incorporated by reference herein). -16- 2. Stockholders' Agreement dated as of June 14, 1997 among the Company, certain shareholders of Consolidated Communications Inc., IES Investments, Midwest Capital Group, Inc., MWR Investments Inc., Clark E. McLeod and Mary E. McLeod and certain other stockholders (previously filed with the Securities and Exchange Commission as Exhibit 4.12 to the Company's Amendment No. 2 to Form S-4 Registration Statement, as filed on July 25, 1997, Registration No. 333-27647 and incorporated by reference herein). 3. Stockholders' Agreement dated as of November 18, 1998 among the Company, the former shareholders of Consolidated Communications Inc. and certain permitted transferees of such shareholders, IES Investments, Clark E. McLeod, Mary E. McLeod and Richard A. Lumpkin. 4. Stockholders' Agreement dated as of January 7, 1999 among the Company, the former shareholders of Consolidated Communication Inc. and certain permitted transferees of such shareholders, IES Investments, Clark E. McLeod, Mary E. McLeod, Richard A. Lumpkin, M/C Investors LLC and Media/Communications Partners III Limited Partnership. -17- SIGNATURES After reasonable inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: March 17, 1999. INTERSTATE ENERGY CORPORATION By: /s/ Edward M. Gleason Edward M. Gleason Vice President-Treasurer and Corporate Secretary ALLIANT INDUSTRIES, INC. By: /s/ Edward M. Gleason Edward M. Gleason Vice President-Treasurer and Corporate Secretary IES INVESTMENTS INC. By: /s/ Edward M. Gleason Edward M. Gleason Treasurer and Secretary INTERSTATE POWER COMPANY By: /s/ Edward M. Gleason Edward M. Gleason Vice President-Treasurer and Corporate Secretary -18- EXHIBIT INDEX Exhibit 1. Investor Agreement dated April 1, 1996 * 2. Stockholders' Agreement dated June 14, 1997 * 3. Stockholders' Agreement dated Exhibit 3 November 18, 1998 4. Stockholders' Agreement dated Exhibit 4 January 7, 1999 - --------------- * Incorporated by reference. -19- EX-99.3 2 STOCKHOLDERS' AGREEMENT DATED 11/18/98 STOCKHOLDERS' AGREEMENT This Stockholders' Agreement (this "Agreement") is entered into as of November 18, 1998, by and among McLeodUSA Incorporated, a Delaware corporation (the "Company"); IES Investments Inc., an Iowa corporation ("IES"); Clark E. McLeod ("McLeod"); Mary E. McLeod (together with McLeod, the "McLeods"); and Richard A. Lumpkin ("Lumpkin") and each of the former shareholders of Consolidated Communications Inc. ("CCI") and certain permitted transferees of the former CCI shareholders in each case who are listed in Schedule I hereto (the "CCI Shareholders"). IES, the McLeods, Lumpkin and the CCI Shareholders are referred to herein collectively as the "Principal Stockholders" and individually as a "Principal Stockholder." WHEREAS, the Company, the Principal Stockholders and certain other stockholders are parties to a Stockholders' Agreement entered into as of June 14, 1997, as amended on September 19, 1997 (the "Original Stockholders' Agreement"); WHEREAS, Section 3 of the Original Stockholders' Agreement has expired in accordance with its terms and certain other provisions thereof will expire in accordance with their terms; and WHEREAS, the Company and the Principal Stockholders deem it to be in the best interests of the Company and its stockholders to enter into a new agreement to continue to provide for the continuity and stability of the business and policies of the Company on the terms and conditions hereinafter set forth; NOW, THEREFORE, for and in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. VOTING AGREEMENT 1.1 Board of Directors For the period commencing on the Voting Agreement Effective Date (as defined in Section 1.2) and ending on the Expiration Date (as defined in Section 1.2), each Principal Stockholder, for so long as such Principal Stockholder beneficially and continuously owns at least four million (4,000,000) shares of the Company's Class A common stock, $.01 par value per share (the "Class A Common Stock"), subject to adjustment pursuant to Section 5.1, shall take or cause to be taken all such action within their respective power and authority as may be required: (a) to establish and maintain the authorized size of the Board of Directors of the Company (the "Board of Directors" or the "Board") at up to eleven (11) directors; (b) to cause to be elected to the Board one (1) director designated by IES, for so long as IES beneficially and continuously owns at least four million (4,000,000) shares of the Class A Common Stock (subject to adjustment pursuant to Section 5.1); (c) to cause Lumpkin to be elected to the Board, for so long as Lumpkin and the CCI Shareholders collectively beneficially and continuously own at least four million (4,000,000) shares of the Class A Common Stock (subject to adjustment pursuant to Section 5.1); (d) to cause to be elected to the Board three (3) directors who are executive officers of the Company designated by McLeod, for so long as the McLeods collectively beneficially and continuously own at least four million (4,000,000) shares of the Class A Common Stock (subject to adjustment pursuant to Section 5.1); (e) to cause to be elected to the Board a director or directors nominated by the Board to replace a director or directors designated pursuant to paragraphs (b) through (d) above upon the earlier to occur of such designated director's or directors' resignation (and the acceptance of such resignation by the Board) and the expiration of such director's or directors' term as a result of any party or parties identified in paragraphs (b) through (d) above no longer beneficially owning at least four million (4,000,000) shares of the Class A Common Stock (subject to adjustment pursuant to Section 5.1) at any time during the period commencing on the Voting Agreement Effective Date and ending on the Expiration Date; it being understood that within three (3) business days following such time as the party or parties identified in paragraphs (b) through (d) above no longer beneficially and continuously own at least four million (4,000,000) shares -2- of the Class A Common Stock (subject to adjustment pursuant to Section 5.1) during such period, such party or parties shall use its or their respective best efforts to cause the director or directors designated by such party or parties to tender their immediate resignation to the Board which the Board may accept or reject; and (f) to cause to be elected to the Board, if and as nominated by the Board, up to six (6) non-employee directors; provided, however, notwithstanding any other provision of this Agreement, if any Principal Stockholder hereto would not be entitled to have a director elected to the Board with respect to such Principal Stockholder under the Original Stockholders' Agreement but would be entitled to have a director elected to the Board with respect to such Principal Stockholder pursuant to Section 1.1 of this Agreement except that the Voting Agreement Effective Date hereunder has not occurred, then this Agreement shall be applied with respect to the election of the director of such Principal Stockholder as if the Voting Agreement Effective Date has occurred and each party hereto shall act under this Agreement to cause the election of the director of such Principal Stockholder. The parties hereto agree that Section 1.1 and Section 1.2 of the Original Stockholders' Agreement shall terminate and be of no force or effect with respect to the rights and obligations of the parties hereto amongst each other as of the Voting Agreement Effective Date. For purposes of Section 1.1, Lumpkin and all of the CCI Shareholders shall be deemed to be a single Principal Stockholder, and a CCI Shareholder shall be deemed to own shares "continuously" as long as the shares of such CCI Shareholder are owned by such CCI Shareholder or by a CCI Permitted Transferee (as defined in Section 3.1). 1.2 Definitions For purposes of this Agreement, the following terms have the meanings indicated: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) A person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: -3- (i) which such person or any of such person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise; (ii) which such person or any of such person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; or (iii)which are beneficially owned, directly or indirectly, by any other person (or any Affiliate or Associate thereof) with which such person or any of such person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting or disposing of any voting securities of the Company. For purposes of the definition of "Beneficial Owner" and "beneficially own," the terms "agreement," "arrangement" and "understanding" shall not include this Agreement or the Original Stockholders' Agreement. (c) "Expiration Date" shall mean December 31, 2001. (d) "Voting Agreement Effective Date" shall mean the date which falls on the earliest to occur of (i) the termination of the Original Stockholders' Agreement, (ii) the expiration of Section 1.1 of the Original Stockholders' Agreement in accordance with its terms and (iii) MWR Investments Inc. ("MWR") no longer being entitled to have a director designated by MWR elected to the Board in accordance with the terms and conditions of Section 1.1 of the Original Stockholders' Agreement. 2. STANDSTILL IES hereby agrees that, prior to the Expiration Date, neither IES nor any Affiliate of IES will (and IES will not assist or encourage others to), directly or -4- indirectly, acquire or agree, offer, seek or propose to acquire, or cause to be acquired, ownership (including, but not limited to, beneficial ownership) of any securities issued by the Company or any of its subsidiaries, or any rights or options to acquire such ownership (including from a third party), except (a) to the extent expressly set forth in this Agreement, (b) as consented prior thereto in writing by the Board of Directors, (c) upon conversion of any Class B common stock, $.01 par value per share, of the Company into Class A Common Stock pursuant to the terms thereof, (d) with respect to transfers of equity securities between or among IES and IES's wholly owned subsidiaries, parent corporation, or other wholly owned subsidiaries of such parent corporation, or (e) with respect to the grant, vesting or exercise of stock options. 3. TRANSFERS OF SECURITIES 3.1 Restrictions on Transfers (a) Except as otherwise provided in this Section 3.1 or Section 3.2, each Principal Stockholder hereby severally agrees that until the Expiration Date, such Principal Stockholder will not offer, sell, contract to sell, grant any option to purchase, or otherwise dispose of, directly or indirectly, ("Transfer"), any equity securities of the Company or any other securities convertible into or exercisable for such equity securities ("Securities") beneficially owned by such Principal Stockholder without submitting a written request to, and receiving the prior written consent of, the Board of Directors, provided, however, that any CCI Shareholder may transfer Securities to any other CCI Shareholder, the spouse of a CCI Shareholder, or a lineal descendant of a CCI Shareholder (or a trust for the primary benefit of any one or more of a CCI Shareholder, the spouse of a CCI Shareholder, or a lineal descendant of a CCI Shareholder or a partnership or limited liability company owned and managed solely by one or more CCI Shareholders, spouses of CCI Shareholders and lineal descendants of CCI Shareholders), or, in the case of a CCI Shareholder that is a trust, to any beneficiary of such trust (or a trust for the primary benefit of such beneficiary or a partnership or limited liability company owned and managed solely by one or more CCI Shareholders, spouses of CCI Shareholders and lineal descendants of CCI Shareholders), in each case provided that (i) such transfer is done in accordance with the transfer restrictions applicable to such Securities under federal and state securities laws and (ii) the transferee agrees to be bound by the terms hereof as a Principal Stockholder with respect to the shares being transferred pursuant to this Section, and any such transfer shall not constitute a "Transfer" for purposes of this Agreement (any such CCI transferee pursuant to this proviso, a "CCI Permitted Transferee"). In the event that the Board of Directors consents to any Transfer of Securities by a Principal Stockholder pursuant to the written request of such Principal Stockholder (a "Transferring Stockholder") and except as otherwise provided in Section 3.1(b) and Section 3.2, each other Principal Stockholder shall, -5- notwithstanding the provisions of this Section 3.1(a), have the right to Transfer a percentage of the total number of Securities beneficially owned by such Principal Stockholder equal to the percentage of the total number of Securities beneficially owned by the Transferring Stockholder that the Board of Directors has consented may be Transferred by such Transferring Stockholder. The parties acknowledge that any Transfer pursuant to this Section 3.1(a) to which the Board of Directors has consented may be in connection with, or as part of, a private placement by the Company of, or other transaction involving, its Securities. (b) In addition to the provisions of Section 3.1(a), commencing for the quarter ending December 31, 1998 and ending on the Expiration Date, the Board shall determine prior to the public release of the Company's consolidated financial results with respect to the end of each financial reporting quarter, the aggregate number, if any, of shares of Class A Common Stock (not to exceed in the aggregate one hundred fifty thousand (150,000) shares of Class A Common Stock per quarter, subject to adjustment pursuant to Section 5.1) that may be Transferred by the Principal Stockholders (the "Transfer Amount") during the period commencing on the third (3rd) business day and ending on the twenty-third (23rd) business day following such public release of the Company's quarterly or annual financial results or such other trading period designated or permitted by the Board with respect to the purchase and sale of its Securities (each such period, a "Transfer Period"). Notwithstanding the provisions of Section 3.1(a), each Principal Stockholder shall be entitled to Transfer during each Transfer Period, provided such Transfer is effected in accordance with all applicable federal and state securities laws, a number of shares of Class A Common Stock equal to thirty-three and one-third percent (33 1/3%) of the Transfer Amount, if any, for such Transfer Period (rounding down in the case of any fractional amount). Any portion of any Principal Stockholder's share of the Transfer Amount that such Principal Stockholder elects not to transfer during a Transfer Period shall be reallocated equally among the remaining Principal Stockholders who intend to Transfer shares of Class A Common Stock during such Transfer Period, and such remaining Principal Stockholders shall be entitled to Transfer such additional shares of Class A Common Stock during the Transfer Period, provided such Transfer is effected in accordance with all applicable federal and state securities laws. In no event shall any portion of a Transfer Amount that is not utilized by a Principal Stockholder during a Transfer Period be reallocated or otherwise credited to any subsequent Transfer Periods. The parties acknowledge that the Company has determined that the Transfer Amount that may be Transferred by the Principal Stockholders during the Transfer Period for the quarter ended September 30, 1998 pursuant to this Section 3.1(b) shall be an aggregate of one hundred fifty thousand (150,000) shares of Class A Common Stock. (c) Commencing for the quarter ending December 31, 1998 and ending on the Expiration Date, the Company shall give each Principal Stockholder prompt written notice (in any event no later than fifty (50) days prior to the -6- beginning of the applicable Transfer Period) of its determination of any Transfer Amount. Within seven (7) days of receipt of such notice, any Principal Stockholder that desires to Transfer shares of Class A Common Stock during such Transfer Period pursuant to Section 3.1(b) shall provide written notice to the Company of the number of shares such Principal Stockholder desires to Transfer. Not later than seven (7) days after receipt of such responses, the Company shall notify all remaining Principal Stockholders of any Principal Stockholder's election not to Transfer the total number of shares of Class A Common Stock that such Principal Stockholder is entitled to Transfer during such Transfer Period. Any Principal Stockholder that desires to Transfer additional shares of Class A Common Stock equal to all or part of the remaining Transfer Amount shall notify the Company within seven (7) days of receipt of the Company's second notice. The Company shall allocate the remaining Transfer Amount in accordance with the provisions of Section 3.1(b) and shall notify the appropriate Principal Stockholders of such allocation no later than ten (10) days prior to the beginning of the Transfer Period. (d) For purposes of this Section 3.1, Lumpkin and all of the CCI Shareholders shall be deemed to be a single Principal Stockholder. 3.2 Registration Rights (a) In the event that the Board of Directors consents pursuant to Section 3.1(a) to a Principal Stockholder's request for a Transfer and in connection therewith, the Company agrees to register Securities with respect to such Transfer under the Securities Act of 1933, as amended (the "Securities Act"), the Company shall grant each other Principal Stockholder the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register for Transfer under the Securities Act a percentage of the total number of Securities beneficially owned by such Principal Stockholder equal to the percentage of the total number of Securities beneficially owned by the Transferring Stockholder that such Transferring Stockholder is registering for Transfer under the Securities Act, on the same terms and conditions as the Transferring Stockholder (each Principal Stockholder registering, or indicating a desire to register, any Securities for Transfer under the Securities Act pursuant to this Section 3.2 being a "Registering Transferor"). (b) To the extent that the Company grants pursuant to Section 3.1(b) a Principal Stockholder the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant each other Principal Stockholder the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register an equal number of shares of Class A Common Stock for Transfer under the Securities Act on the same terms and conditions. (c) In the event the Company proposes to register any shares of Class A Common Stock under the Securities Act pursuant to an underwritten -7- primary offering (other than pursuant to a registration statement on Form S-4 or Form S-8 or any successor forms thereto or other form which would not permit the inclusion of the shares of Class A Common Stock of the Principal Stockholders), the Company, as determined by the Board of Directors, shall give written notice to all Principal Stockholders of its intention to effect such a registration. Following any such notice, the Board of Directors shall undertake to determine the aggregate number, if any, of shares of Class A Common Stock held by the Principal Stockholders (not to exceed in the aggregate on a per year basis a number of shares of Class A Common Stock equal to fifteen percent (15%) of the total number of shares of Class A Common Stock beneficially owned by the Principal Stockholders as of December 31, 1998, subject to adjustment pursuant to Section 5.1) to be registered by the Company under the Securities Act (the "Registrable Amount") for Transfer by the Principal Stockholders in connection with such offering. If the Board determines to register shares of Class A Common Stock held by the Principal Stockholders pursuant to this Section 3.2(c), the Company will promptly give written notice of such determination to all Principal Stockholders, and thereupon the Company will use commercially reasonable efforts to effect the registration of that portion of the Registrable Amount that the Registering Transferors indicate a desire to register. In the event the Registering Transferors indicate a desire to register a number of shares of Class A Common Stock that, in the aggregate, exceeds the Registrable Amount, the number of shares of Class A Common Stock that each Registering Transferor shall be entitled to register shall be reduced to the extent such number exceeds such Registering Transferor's pro rata share of the Registrable Amount based upon the ratio of the total number of Securities beneficially owned by such Registering Transferor to the total number of Securities beneficially owned by all Principal Shareholders. To the extent any portion of the Registrable Amount remains unallocated after such reductions, each Registering Transferor who has indicated a desire to register additional shares of Class A Common Stock shall be entitled to register an additional amount of Class A Common Stock equal to such Registering Transferor's pro rata portion of the remaining Registrable Amount based upon the ratio of the total number of Securities beneficially owned by such Registering Transferor to the total number of Securities beneficially owned by all Registering Transferors who have indicated a desire to register additional shares of Class A Common Stock. The reallocation procedure described in the preceding sentence shall be repeated until the entire Registrable Amount is allocated. All terms, conditions and rights with respect to such registration (including but not limited to any determination to reduce the Registrable Amount) shall be determined by the Board, provided that (i) the representations and warranties of a Principal Stockholder shall be customary taking into account, among other things, the nature of the offering and such Principal Stockholder's relationship with the Company, and (ii) the Company shall be responsible for all expenses with respect to such registration other than underwriting discounts and commissions allocable to the Class A Common Stock of the Registering Transferors, which underwriting discounts and commissions shall be the responsibility of the Registering Transferors. -8- (d) In addition to the registration rights granted pursuant to Sections 3.2(a), (b) and (c), no more frequently than once during each of the calendar years ending December 31, 1999, 2000 and 2001 (each such year, an "Annual Period"), and upon either (i) the receipt of a written request of one or more Principal Stockholders or (ii) a determination by the Board of Directors, the Board shall undertake to determine the Registrable Amount, if any, for Transfer by the Principal Stockholders. If the Board determines to register shares of Class A Common Stock held by the Principal Stockholders pursuant to this Section 3.2(d), the Company will promptly give written notice of such determination to all Principal Stockholders, and thereupon the Company will use commercially reasonable efforts to effect the registration of that portion of the Registrable Amount that the Registering Transferors indicate a desire to register. In the event the Registering Transferors indicate a desire to register a number of shares of Class A Common Stock that, in the aggregate, exceeds the Registrable Amount, the number of shares of Class A Common Stock that each Registering Transferor shall be entitled to register shall be reduced to the extent such number exceeds such Registering Transferor's pro rata share of the Registrable Amount based upon the ratio of the total number of Securities beneficially owned by such Registering Transferor to the total number of Securities beneficially owned by all Principal Stockholders. To the extent any portion of the Registrable Amount remains unallocated after such reductions, each Registering Transferor who has indicated a desire to register additional shares of Class A Common Stock shall be entitled to register an additional amount of Class A Common Stock equal to such Registering Transferor's pro rata portion of the remaining Registrable Amount based upon the ratio of the total number of Securities beneficially owned by such Registering Transferor to the total number of Securities beneficially owned by all Registering Transferors who have indicated a desire to register additional shares of Class A Common Stock. The reallocation procedure described in the preceding sentence shall be repeated until the entire Registrable Amount is allocated. All terms, conditions and rights with respect to such registration (including but not limited to any determination to reduce the Registrable Amount) shall be determined by the Board, provided that (i) the representations and warranties of a Principal Stockholder shall be customary taking into account, among other things, the nature of the offering and such Principal Stockholder's relationship with the Company, and (ii) the Company shall be responsible for all expenses with respect to such registration other than underwriting discounts and commissions, which underwriting discounts and commissions shall be the responsibility of the Registering Transferors. (e) If the Board establishes a committee (a "Pricing Committee") to authorize and approve the price and any other terms of any Transfer of Securities registered under the Securities Act pursuant to this Section 3.2 in which Lumpkin or any CCI Shareholder is participating as a Registering Transferor, the Company will use its best efforts to cause Lumpkin to be nominated to such Pricing -9- Committee. Notwithstanding any other provision of this Agreement, to the extent the Company has undertaken to register Securities of the Principal Stockholders pursuant to this Section 3.2, the Company may subsequently determine not to register such Securities and may either not file a registration statement or otherwise withdraw or abandon a registration statement previously filed with respect to the registration of such Securities. (f) For purposes of this Section 3.2, Lumpkin and all of the CCI Shareholders shall be deemed to be a single Principal Stockholder. 4. REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of Non-individual Stockholders Each non-individual Principal Stockholder hereby represents and warrants, as of the date of this Agreement, to the Company and to each other Principal Stockholder as follows: 4.1.1 Authorization Such Principal Stockholder has taken all action necessary for it to enter into this Agreement and to consummate the transactions contemplated hereby. 4.1.2 Binding Obligation This Agreement constitutes a valid and binding obligation of such Principal Stockholder, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by such Principal Stockholder pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of such Principal Stockholder, enforceable in accordance with its terms (with the aforesaid exceptions). 4.2 Representations and Warranties of Individual Stockholders Each Principal Stockholder who is an individual hereby represents and warrants, as of the date of this Agreement, to the Company and to each other Principal Stockholder as follows: -10- 4.2.1 Power and Authority Such Principal Stockholder has the legal capacity and all other necessary power and authority necessary to enter into this Agreement and to consummate the transactions contemplated hereby. 4.2.2 Binding Obligation This Agreement constitutes a valid and binding obligation of such Principal Stockholder, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by such Principal Stockholder pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of such Principal Stockholder, enforceable in accordance with its terms (with the aforesaid exceptions). 4.3 Representations and Warranties of the Company The Company hereby represents and warrants, as of the date of this Agreement, to each Principal Stockholder as follows: 4.3.1 Authorization The Company has taken all corporate action necessary for it to enter into this Agreement and to consummate the transactions contemplated hereby. 4.3.2 Binding Obligation This Agreement constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by the Company pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of the Company, enforceable in accordance with its terms (with the aforesaid exceptions). 5. MISCELLANEOUS 5.1 Effect of Changes in Capitalization All share amounts of the Company's capital stock referred to in this Agreement shall be appropriately and proportionally adjusted for any -11- recapitalization, reclassification, stock split-up, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company, occurring after the date of this Agreement. 5.2 Additional Actions and Documents Each of the parties hereto hereby agrees to take or cause to be taken such further actions, to execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments, and to obtain such consents, as may be necessary or as may be reasonably requested in order to fully effectuate the purposes, terms and conditions of this Agreement, whether before, at or after the effective time of this Agreement. 5.3 Entire Agreement; Amendment This Agreement constitutes the entire agreement among the parties hereto as of the date hereof with respect to the matters contemplated herein, except with respect to Sections 1.1, 1.2.1, 1.2.2, 1.2.3 and to the extent applicable Section 1.2.4 of the Original Stockholders' Agreement which Sections shall be superseded on the terms contemplated hereby with respect to the rights and obligations of the parties hereto amongst each other as of the Voting Agreement Effective Date. No amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, or discharge is sought. 5.4 Limitation on Benefit It is the explicit intention of the parties hereto that no person or entity other than the parties hereto is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants, undertakings and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors, heirs, executors, administrators, legal representatives and permitted assigns. 5.5 Binding Effect; Specific Performance This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, heirs, executors, administrators, legal representatives and permitted assigns. No party shall assign this Agreement without the written consent of the other parties hereto; and such consent shall not be unreasonably withheld. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance -12- with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. 5.6 Governing Law This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of Delaware (excluding the choice of law rules thereof). 5.7 Notices All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand-delivered or mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telecopy, facsimile transmission or telex, addressed as follows: (i) If to the Company or to the McLeods: McLeodUSA Incorporated McLeodUSA Technology Park 6400 C Street, SW, P.O. Box 3177 Cedar Rapids, IA 52406-3177 Attention: Randall Rings Facsimile: (319) 298-7901 (ii) If to IES: IES Investments Inc. 200 1st Street SE Cedar Rapids, IA 52401 Attention: James E. Hoffman Facsimile: (319) 398-4204 (iii) If to Lumpkin or any CCI Shareholder: P.O. Box 1234 Mattoon, IL 61938 Attention: Richard A. Lumpkin Facsimile: (217) 234-9934 -13- with a copy to : Schiff Hardin & Waite 6600 Sears Tower Chicago, Illinois 60606 Attention: David R. Hodgman, Esq. Facsimile: (312) 258-5600 Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication which shall be hand-delivered, mailed, transmitted, telecopied or telexed in the manner described above, or which shall be delivered to a telegraph company, shall be deemed sufficiently given, served, sent, received or delivered for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, or the answerback being deemed conclusive, but not exclusive, evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 5.8 Termination Notwithstanding any other provision of this Agreement, if during any Annual Period the Board of Directors has not provided a Principal Stockholder a reasonable opportunity to Transfer Securities pursuant to Section 3.2 or consented to the written request of such Principal Stockholder or otherwise provided such Principal Stockholder a reasonable opportunity to Transfer (other than a transfer by a CCI Shareholder to a CCI Permitted Transferee) pursuant to Section 3.1(a) an aggregate number of shares of Class A Common Stock equal to not less than fifteen percent (15%) of the total number of shares of Class A Common Stock beneficially owned by such Principal Stockholder as of December 31, 1998, subject to adjustment pursuant to Section 5.1, then such Principal Stockholder may terminate this Agreement as it applies to such terminating party by providing written notice of termination to all other parties no later than ten (10) business days following the end of such Annual Period, such that all rights and obligations hereunder shall cease, and this Agreement shall be of no further force or effect, with respect to the terminating party. Unless otherwise previously terminated by the Principal Stockholders pursuant to this Section 5.8, this Agreement shall terminate on the Expiration Date. For purposes of this Section 5.8, Lumpkin and all of the CCI Shareholders shall be deemed to be a single Principal Stockholder. 5.9 Publicity Each of the Principal Stockholders will use its reasonable best efforts to consult with the Company prior to issuing any press release, making any filing -14- with any governmental entity or national securities exchange or making any other public dissemination of information by such Principal Stockholder within which this Agreement or the contents hereof are referenced or described. 5.10 Appointment of Representative Each of the CCI Shareholders hereby appoints Lumpkin, with power of substitution, as its exclusive agent to act on its behalf with respect to any and all actions to be taken under or amendments or modifications to be made to this Agreement (the "Representative"). The Representative shall take, and the CCI Shareholders agree that the Representative shall take, any and all actions which the Representative believes are necessary or advisable under this Agreement for and on behalf of each of the CCI Shareholders, as fully as if each of the CCI Shareholders were acting on its own behalf, including, without limitation, dealing with the Company and the other parties hereto with respect to all matters arising under this Agreement, entering into any amendment or modification to this Agreement deemed advisable by the Representative and taking any and all other actions specified in or contemplated by this Agreement. The Company and the other parties hereto shall have the right to rely upon all actions taken or not taken by the Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon each of the CCI Shareholders. 5.11 Execution in Counterparts To facilitate execution, this Agreement may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto. -15- IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement, or have caused this Agreement to be duly executed and delivered on their behalf, as of the day and year first hereinabove set forth. MCLEODUSA INCORPORATED IES INVESTMENTS INC. By: /s/ J. Lyle Patrick By: /s/ James E. Hoffman Name: J. Lyle Patrick Name: James E. Hoffman Title: Group Vice President, Title: President Chief Financial Officer and Treasurer /s/ Clark E. McLeod /s/ Mary E. McLeod Clark E. McLeod Mary E. McLeod /s/ Richard A. Lumpkin /s/ Gail G. Lumpkin Richard A. Lumpkin Gail G. Lumpkin Margaret Lumpkin Keon Trust Mary Lee Sparks Trust dated May 13, 1978 dated May 13, 1978 /s/ Margaret Lumpkin Keon /s/ Mary Lee Sparks Margaret Lumpkin Keon, as Trustee Mary Lee Sparks, as Trustee /s/ Steve L. Grissom Steven L. Grissom, as Trustee /s/ Mary Lee Sparks Mary Lee Sparks -16- The twelve trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989 one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks Bank One, Texas, N.A., Trustee /s/ Frank A. Glispin By: Frank A. Glispin, Vice President The twelve trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks Bank One, Texas, N.A., Trustee /s/ Frank A. Glispin By: Frank A. Glispin, Vice President -17- The three trusts established by Richard Adamson Lumpkin under Trust Agreement dated February 6, 1970, one for the benefit of each of: Richard Anthony Lumpkin, Margaret Anne Keon, and Mary Lee Sparks Bank One, Texas, N.A., Trustee /s/ Frank A. Glispin By: Frank A. Glispin, Vice President The twelve 1990 Personal Income Trusts established by Margaret L. Keon, Mary Lee Sparks, and Richard A. Lumpkin, each dated April 20, 1990, one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks /s/ David R. Hodgman David R. Hodgman, Trustee /s/ Steve L. Grissom Steven L. Grissom, Trustee -18- SCHEDULE I Richard A. Lumpkin Gail G. Lumpkin Margaret Lumpkin Keon, as Trustee under the Margaret Lumpkin Keon Trust dated May 13, 1978 Mary Lee Sparks and Steven L. Grissom, as Trustees of the Mary Lee Sparks Trust dated May 13, 1978 Bank One, Texas, N.A., as Trustee of the twelve trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks Bank One, Texas, N.A., as Trustee of the twelve trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks Bank One, Texas, N.A., as Trustee of the three trusts established by Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, one for the benefit of each of Richard Anthony Lumpkin, Margaret Anne Keon, and Mary Lee Sparks David R. Hodgman and Steven L. Grissom, as Trustees of the twelve 1990 Personal Income Trusts established by Margaret L. Keon, Mary Lee Sparks, and Richard A. Lumpkin, each dated April 20, 1990, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks EX-99.4 3 STOCKHOLDERS' AGREEMENT 1/7/99 STOCKHOLDERS' AGREEMENT This Stockholders' Agreement (this "Agreement") is entered into as of January 7, 1999, by and among McLeodUSA Incorporated, a Delaware corporation (the "Company"); IES Investments Inc., an Iowa corporation ("IES"); Clark E. McLeod ("McLeod"); Mary E. McLeod (together with McLeod, the "McLeods"); Richard A. Lumpkin ("Lumpkin") and each of the former stockholders of Consolidated Communications Inc. ("CCI") and certain permitted transferees of the former CCI shareholders in each case who are listed in Schedule I hereto (the "CCI Shareholders"); and M/C Investors L.L.C. ("M/C Investors") and Media/Communications Partners III Limited Partnership, a Delaware limited partnership ("M/C Partners" and together with M/C Investors, the "New Stockholders"). IES, the McLeods, Lumpkin and the CCI Shareholders party hereto are referred to herein collectively as the "1998 Stockholders" and individually as a "1998 Stockholder." WHEREAS, the Company and the 1998 Stockholders are parties to a Stockholders' Agreement entered into as of November 18, 1998 (the "1998 Stockholders' Agreement"); WHEREAS, in order to induce the Company and Bravo Acquisition Corporation, a wholly owned subsidiary of the Company, to enter into an Agreement and Plan of Merger (the "Merger Agreement") to which the New Stockholders and certain others are a party, the New Stockholders, concurrent with the execution and delivery of the Merger Agreement, are entering into this Agreement; WHEREAS, upon the closing of the Merger Agreement and the transactions contemplated thereby, the New Stockholders will become stockholders of the Company; and WHEREAS, the Company, the 1998 Stockholders and the New Stockholders deem it to be in the best interests of the Company and its stockholders to enter into this Agreement to continue to provide for the continuity and stability of the business and policies of the Company on the terms and conditions hereinafter set forth; NOW, THEREFORE, for and in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. [INTENTIONALLY DELETED] 2. VOTING AGREEMENT 2.1 Board of Directors (i) For the period commencing on the Effective Date (as defined in Section 2.2) and ending on the Expiration Date (as defined in Section 2.2), each 1998 Stockholder, for so long as such 1998 Stockholder beneficially and continuously owns at least four million (4,000,000) shares of the Company's Class A common stock, $.01 par value per share (the "Class A Common Stock"), subject to adjustment pursuant to Section 5.1, shall take or cause to be taken all such action within their respective power and authority as may be required: (a) to cause to be elected to the Board of Directors of the Company (the "Board of Directors" or the "Board") one (1) director designated by the New Stockholders, for so long as the New Stockholders collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (b) (b) to cause to be elected to the Board a director nominated by the Board to replace a director designated pursuant to paragraph (i)(a) above upon the earlier to occur of such designated director's resignation (and the acceptance of such resignation by the Board) and the expiration of such director's term as a result of the New Stockholders no longer collectively beneficially and continuously owning at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1) at any time during the period commencing on the Effective Date and ending on the Expiration Date; it being understood that within three (3) business days following such time as the New Stockholders no longer collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1) at any time during such period, the New Stockholders shall use their best efforts to cause the director designated by the New Stockholders to tender its immediate resignation to the Board which the Board may accept or, if consented to by such director, reject; -2- (c) to establish and maintain the authorized size of the Board at up to eleven (11) directors; and (d) to cause to be elected to the Board, if and as nominated by the Board, up to five (5) non-employee directors. (ii) For the period commencing on the Effective Date and ending on the Expiration Date, the New Stockholders, for so long as the New Stockholders collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock, subject to adjustment pursuant to Section 5.1, shall take or cause to be taken all such action within their respective power and authority as may be required: (a) to establish and maintain the authorized size of the Board of Directors at up to eleven (11) directors; (b) to cause to be elected to the Board one (1) director designated by IES, for so long as IES beneficially and continuously owns at least four million (4,000,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (c) to cause Lumpkin to be elected to the Board, for so long as Lumpkin and the CCI Shareholders collectively beneficially and continuously own at least four million (4,000,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (d) to cause to be elected to the Board three (3) directors who are executive officers of the Company designated by McLeod, for so long as the McLeods collectively beneficially and continuously own at least four million (4,000,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (e) to cause to be elected to the Board one (1) director designated by the New Stockholders, for so long as the New Stockholders collectively beneficially and continuously own at least two million five hundred thousand (2,500,000) shares of Class A Common Stock (subject to adjustment pursuant to Section 5.1); (f) to cause to be elected to the Board a director or directors nominated by the Board to replace a director or directors designated pursuant to paragraphs (ii)(b) through (ii)(e) above upon the earlier to occur of such designated -3- director's or directors' resignation (and the acceptance of such resignation by the Board) and the expiration of such director's or directors' term as a result of any party or parties identified in paragraphs (ii)(b) through (ii)(e) above no longer beneficially owning the specified number of shares of Class A Common Stock as set forth in paragraphs (ii)(b) through (ii)(e), as the case may be, at any time during the period commencing on the Effective Date and ending on the Expiration Date; it being understood that within three (3) business days following such time as the party or parties identified in paragraphs (ii)(b) through (ii)(e) above no longer beneficially and continuously own the specified number of shares of Class A Common Stock as set forth in paragraphs (ii)(b) through (ii)(e), as the case may be, during such period, such party or parties shall use its or their respective best efforts to cause the director or directors designated by such party or parties to tender their immediate resignation to the Board which the Board may accept or reject; and (g) to cause to be elected to the Board, if and as nominated by the Board, up to five (5) non-employee directors. For purposes of this Section 2.1, (i) the New Stockholders shall be deemed to be a single stockholder of the Company, and a New Stockholder shall be deemed to own shares "continuously" as long as the shares of such New Stockholder are owned by such New Stockholder or a New Stockholder Permitted Transferee (as defined in Section 3.1) and (ii) Lumpkin and all of the CCI Shareholders shall be deemed to be a single stockholder of the Company, and a CCI Shareholder shall be deemed to own shares "continuously" as long as the shares of such CCI Shareholder are owned by such CCI Shareholder or a CCI Permitted Transferee (as defined in the 1998 Stockholders' Agreement). 2.2 Definitions For purposes of this Agreement, the following terms have the meanings indicated: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) A person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: -4- (i) which such person or any of such person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise; (ii) which such person or any of such person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; or (iii) which are beneficially owned, directly or indirectly, by any other person (or any Affiliate or Associate thereof) with which such person or any of such person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting or disposing of any voting securities of the Company. For purposes of the definition of "Beneficial Owner" and "beneficially own," the terms "agreement," "arrangement" and "understanding" shall not include this Agreement, the 1998 Stockholders' Agreement or the Stockholders' Agreement, dated as of June 14, 1997, as amended on September 19, 1997 (the "1997 Stockholders' Agreement"). (c) "Effective Date" shall mean the date on which the Merger (as defined in the Merger Agreement) is consummated in accordance with the terms and conditions of the Merger Agreement. (d) "Expiration Date" shall mean December 31, 2001. 3. TRANSFERS OF SECURITIES 3.1 Restrictions on Transfers (a) Except as otherwise provided in this Section 3.1 or Section 3.2, the New Stockholders hereby agree that until the Expiration Date, the New -5- Stockholders will not offer, sell, contract to sell, grant any option to purchase, or otherwise dispose of, directly or indirectly, ("Transfer"), any equity securities of the Company or any other securities convertible into or exercisable for such equity securities ("Securities") beneficially owned by such New Stockholders as a result of the Merger (including distributions of Securities with respect to such Securities and Securities acquired as a result of a stock split with respect to such Securities) without submitting a written request to, and receiving the prior written consent of, the Board of Directors; provided, however, that a New Stockholder may transfer Securities to any beneficial owner or Affiliate of such New Stockholder, in each case provided that (i) such transfer is done in accordance with the transfer restrictions applicable to such Securities under federal and state securities laws and (ii) the transferee agrees to be bound by the terms hereof as a New Stockholder with respect to the shares being transferred pursuant to this Section (any such New Stockholder transferee pursuant to this proviso, a "New Stockholder Permitted Transferee"), and any such transfer shall not constitute a "Transfer" for purposes of this Agreement. Notwithstanding the foregoing, no party hereto shall avoid the provisions of this Agreement by making one or more transfers to one or more New Stockholder Permitted Transferees and then disposing of all or any portion of such party's interest in any such New Stockholder Permitted Transferee. In the event that the Board of Directors consents to any Transfer of Securities by a Principal Stockholder (for purposes of this Agreement, the term "Principal Stockholder" shall have the same meaning as ascribed to such term in the 1998 Stockholders' Agreement) pursuant to the written request of such Principal Stockholder (the "Transferring Principal Stockholder") during the period commencing on January 1, 2000 and ending on the Expiration Date and except as otherwise provided in Section 3.1(b) and Section 3.2, the New Stockholders shall notwithstanding the provisions of this Section 3.1(a), have the right to Transfer a percentage of the total number of Securities beneficially owned by the New Stockholders equal to the percentage of the total number of Securities beneficially owned by the Transferring Principal Stockholder that the Board of Directors has consented may be Transferred by such Transferring Principal Stockholder. In the event the Board of Directors consents to any Transfer of Securities by the New Stockholders pursuant to the written request of the New Stockholders (the "Transferring New Stockholders"), and except as otherwise provided in Section 3.1(b) and Section 3.2 of the 1998 Stockholders' Agreement, each Principal Stockholder shall, notwithstanding the provisions of Section 3.1(a) of the 1998 Stockholders' Agreement, have the right to Transfer a percentage of the total number of Securities beneficially owned by such Principal Stockholder equal to the percentage of the total number of Securities beneficially owned by the Transferring New Stockholders that the Board of Directors has consented may be Transferred by such Transferring New Stockholders. (b) In addition to the provisions of Section 3.1(a), for the period commencing for the quarter ending December 31, 1999 and ending on the Expiration Date, the Board shall determine prior to the public release of the -6- Company's consolidated financial results with respect to each such financial reporting quarter during such period, the aggregate number, if any, of shares of Class A Common Stock (not to exceed in the aggregate fifty thousand (50,000) shares of Class A Common Stock per quarter, subject to adjustment pursuant to Section 5.1) that may be Transferred by the New Stockholders (the "Transfer Amount") during the period commencing on the third (3rd) business day and ending on the twenty-third (23rd) business day following such public release of the Company's quarterly or annual financial results or such other trading period designated or permitted by the Board with respect to the purchase and sale of its Securities (each such period, a "Transfer Period"). Notwithstanding the provisions of Section 3.1(a), the New Stockholders shall be entitled to Transfer during each Transfer Period, provided such Transfer is effected in accordance with all applicable federal and state securities laws, a number of shares of Class A Common Stock equal to the Transfer Amount, if any, for such Transfer Period. In no event shall any portion of a Transfer Amount that is not utilized by the New Stockholders during a Transfer Period be reallocated or otherwise credited to any subsequent Transfer Periods. Notwithstanding the foregoing provisions of this Section 3.1(b), to the extent that the Company permits the Principal Stockholders the opportunity to Transfer shares of Class A Common Stock pursuant to Section 3.1(b) of the 1998 Stockholders' Agreement during the period commencing on January 1, 2000 and ending on the Expiration Date, the Company shall grant the New Stockholders the opportunity to Transfer on the same terms and conditions a number of shares of Class A Common Stock equal to the number of shares which each Principal Stockholder is entitled to Transfer pursuant to such Section 3.1(b), without considering those provisions of Section 3.1(b) of the 1998 Stockholders' Agreement relating to the reallocation of amounts among the Principal Stockholders. To the extent the Board determines a Transfer Amount with respect to the New Stockholders for any particular quarter, the Board shall determine an equal Transfer Amount for such quarter with respect to each Principal Stockholder pursuant to Section 3.1(b) of the 1998 Stockholders' Agreement. (c) For the period commencing for the quarter ending December 31, 1999 and ending on the Expiration Date, the Company shall give the New Stockholders prompt written notice (in any event no later than fifty (50) days prior to the beginning of the applicable Transfer Period) of its determination of any Transfer Amount. Within seven (7) days of receipt of such notice, the New Stockholders shall provide written notice to the Company of the number of shares of Class A Common Stock that the New Stockholders desire to Transfer pursuant to Section 3.1(b). (d) During the year ending December 31, 1999, to the extent the Company participates in a strategic transaction with an outside investor(s) pursuant to which such investor(s) acquires Securities of the Company at a premium to the then average trading price of the Company's Securities, and after the Company has been paid or otherwise received its consideration or proceeds from -7- such transaction as determined by the Company, the Principal Stockholders and the New Stockholders may be entitled to participate in such transaction on a pro rata basis as determined by the Board of Directors. (e) For purposes of this Section 3.1, the New Stockholders shall be deemed to be a single stockholder of the Company, and Lumpkin and all of the CCI Shareholders shall be deemed to be a single Principal Stockholder. 3.2 Registration Rights (a) In the event that the Board of Directors consents pursuant to Section 3.1(a) of the 1998 Stockholders' Agreement to a Principal Stockholder's request for a Transfer during the period commencing on January 1, 2000 and ending on the Expiration Date and in connection therewith, the Company agrees to register Securities with respect to such Transfer under the Securities Act of 1933, as amended (the "Securities Act"), the Company shall grant the New Stockholders the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register for Transfer under the Securities Act a percentage of the total number of Securities beneficially owned by the New Stockholders equal to the percentage of the total number of Securities beneficially owned by the Transferring Principal Stockholder that such Transferring Principal Stockholder is registering for Transfer under the Securities Act, on the same terms and conditions as the Transferring Principal Stockholder. In the event that the Board of Directors consents pursuant to Section 3.1(a) of this Agreement to the New Stockholders' request for a Transfer, and in connection therewith the Company agrees to register Securities with respect to such Transfer under the Securities Act, the Company shall grant each Principal Stockholder pursuant to Section 3.1(a) of the 1998 Stockholders' Agreement the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register for Transfer under the Securities Act a percentage of the total number of Securities beneficially owned by such Principal Stockholder equal to the percentage of the total number of Securities beneficially owned by the Transferring New Stockholders that such Transferring New Stockholders are registering under the Securities Act, on the same terms and conditions as the Transferring New Stockholders. (b) To the extent that the Company grants pursuant to Section 3.1(b) of the 1998 Stockholders' Agreement a Principal Stockholder the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act during the period commencing on January 1, 2000 and ending on the Expiration Date, the Company shall grant the New Stockholders the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register an equal number of shares of Class A Common Stock for Transfer under the Securities Act on the same terms and conditions, without considering those provisions of Section 3.1(b) of the 1998 Stockholders' Agreement relating to the reallocation of amounts among the Principal Stockholders. To the extent that the Company grants -8- pursuant to Section 3.1(b) of this Agreement the New Stockholders the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant each Principal Stockholder pursuant to Section 3.1(b) of the 1998 Stockholders' Agreement the opportunity (subject to reduction in the event the registered Transfer is underwritten) to register an equal number of shares of Class A Common Stock for Transfer under the Securities Act on the same terms and conditions. (c) For the period commencing on January 1, 2000 and ending on the Expiration Date, in the event the Company proposes to register any shares of Class A Common Stock under the Securities Act pursuant to an underwritten primary offering (other than pursuant to a registration statement on Form S-4 or Form S-8 or any successor forms thereto or other form which would not permit the inclusion of the shares of Class A Common Stock of the New Stockholders), the Company, as determined by the Board of Directors, shall give written notice to the New Stockholders of its intention to effect such a registration. Following any such notice, the Board of Directors shall undertake to determine the aggregate number, if any, of shares of Class A Common Stock held by the New Stockholders (not to exceed in the aggregate on a per year basis a number of shares of Class A Common Stock equal to fifteen percent (15%) of the total number of shares of Class A Common Stock beneficially owned by the New Stockholders as of the Effective Date) to be registered by the Company under the Securities Act (the "Registrable Amount") for Transfer by the New Stockholders in connection with such offering during such period. If the Board determines to register shares of Class A Common Stock held by the New Stockholders pursuant to this Section 3.2(c), the Company will promptly give written notice of such determination to the New Stockholders, and thereupon the Company will use commercially reasonable efforts to effect the registration of that portion of the Registrable Amount that the New Stockholders indicate a desire to register. All terms, conditions and rights with respect to such registration (including but not limited to any determination to reduce the Registrable Amount) shall be determined by the Board, provided that (i) the representations and warranties of the New Stockholders shall be customary taking into account, among other things, the nature of the offering and the New Stockholders' relationship with the Company, and (ii) the Company shall be responsible for all expenses with respect to such registration other than underwriting discounts and commissions allocable to the Class A Common Stock of the New Stockholders, which underwriting discounts and commissions shall be the responsibility of the New Stockholders. Notwithstanding the foregoing provisions of this Section 3.2(c), to the extent that the Company grants pursuant to Section 3.2(c) of the 1998 Stockholders' Agreement the Principal Stockholders the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act during the period commencing on January 1, 2000 and ending on the Expiration Date, the Company shall grant the New Stockholders the opportunity to register shares of Class A Common Stock on a substantially similar basis. To the extent that the Company grants pursuant to Section 3.2(c) of this Agreement the New -9- Stockholders the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant each Principal Stockholder pursuant to Section 3.2(c) of the 1998 Stockholders' Agreement the opportunity to register shares of Class A Common Stock on a substantially similar basis. (d) In addition to the registration rights granted pursuant to Sections 3.2(a), (b) and (c), no more frequently than once during each of the calendar years ending December 31, 2000 and 2001 (each such year, an "Annual Period"), and upon either (i) the receipt of a written request of the New Stockholders or (ii) a determination by the Board of Directors, the Board shall undertake to determine the Registrable Amount, if any, for Transfer by the New Stockholders. If the Board determines to register shares of Class A Common Stock held by the New Stockholders pursuant to this Section 3.2(d), the Company will promptly give written notice of such determination to the New Stockholders, and thereupon the Company will use commercially reasonable efforts to effect the registration of that portion of the Registrable Amount that the New Stockholders indicate a desire to register. All terms, conditions and rights with respect to such registration (including but not limited to any determination to reduce the Registrable Amount) shall be determined by the Board, provided that (i) the representations and warranties of the New Stockholders shall be customary taking into account, among other things, the nature of the offering and the New Stockholders' relationship with the Company, and (ii) the Company shall be responsible for all expenses with respect to such registration other than underwriting discounts and commissions allocable to the Class A Common Stock of the New Stockholders, which underwriting discounts and commissions shall be the responsibility of the New Stockholders. Notwithstanding the foregoing provisions of this Section 3.2(d), to the extent that the Company grants pursuant to Section 3.2(d) of the 1998 Stockholders' Agreement the Principal Stockholders the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act during the period commencing on January 1, 2000 and ending on the Expiration Date, the Company shall grant the New Stockholders the opportunity to register shares of Class A Common Stock on a substantially similar basis. To the extent that the Company grants pursuant to Section 3.2(d) of this Agreement the New Stockholders the opportunity to register shares of Class A Common Stock for Transfer under the Securities Act, the Company shall grant each Principal Stockholder pursuant to Section 3.2(d) of the 1998 Stockholders' Agreement the opportunity to register shares of Class A Common Stock on a substantially similar basis. (e) For purposes of this Section 3.2, the New Stockholders shall be deemed to be a single stockholder of the Company, and Lumpkin and all of the CCI Shareholders shall be deemed to be a single Principal Stockholder. (f) Notwithstanding any other provision of this Agreement, to the extent the Company has undertaken to register Securities of the New Stockholders -10- pursuant to this Section 3.2, the Company may subsequently determine not to register such Securities and may either not file a registration statement or otherwise withdraw or abandon a registration statement previously filed with respect to the registration of such Securities; provided that to the extent the Principal Stockholders are also participating in such registration, the New Stockholders and the Principal Stockholders will be treated on a substantially similar basis with respect to any such determination not to register Securities or the withdrawal or abandonment of a registration statement previously filed as contemplated by this Section 3.2(f). 4. REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of Non-individual Stockholders Each non-individual party to this Agreement hereby represents and warrants, as of the date of this Agreement, to the Company and to each other party as follows: 4.1.1 Authorization Such party has taken all action necessary for it to enter into this Agreement and to consummate the transactions contemplated hereby. 4.1.2 Binding Obligation This Agreement constitutes a valid and binding obligation of such party, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by such party pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of such party, enforceable in accordance with its terms (with the aforesaid exceptions). 4.2 Representations and Warranties of Individual Stockholders Each party to this Agreement who is an individual hereby represents and warrants, as of the date of this Agreement, to the Company and to each other party as follows: -11- 4.2.1 Power and Authority Such party has the legal capacity and all other power and authority necessary to enter into this Agreement and to consummate the transactions contemplated hereby. 4.2.2 Binding Obligation This Agreement constitutes a valid and binding obligation of such party, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by such party pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of such party, enforceable in accordance with its terms (with the aforesaid exceptions). 4.3 Representations and Warranties of the Company The Company hereby represents and warrants, as of the date of this Agreement, to each party as follows: 4.3.1 Authorization The Company has taken all corporate action necessary for it to enter into this Agreement and to consummate the transactions contemplated hereby. 4.3.2 Binding Obligation This Agreement constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, and similar laws affecting the rights and remedies of creditors generally, and by general principles of equity and public policy; and each document and instrument to be executed by the Company pursuant hereto, when executed and delivered in accordance with the provisions hereof, shall be a valid and binding obligation of the Company, enforceable in accordance with its terms (with the aforesaid exceptions). 5. MISCELLANEOUS 5.1 Effect of Changes in Capitalization All share amounts of the Company's capital stock referred to in this Agreement shall be appropriately and proportionally adjusted for any recapitalization, reclassification, stock split-up, combination of shares, exchange of -12- shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company, occurring after the date of this Agreement. 5.2 Additional Actions and Documents Each of the parties hereto hereby agrees to take or cause to be taken such further actions, to execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments, and to obtain such consents, as may be necessary or as may be reasonably requested in order to fully effectuate the purposes, terms and conditions of this Agreement, whether before, at or after the Effective Date. 5.3 Entire Agreement; Amendment This Agreement constitutes the entire agreement among the parties hereto as of the date hereof with respect to the specific matters contemplated herein (except with respect to the 1998 Stockholders, as set forth in the 1998 Stockholders' Agreement and the 1997 Stockholders' Agreement). No amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by the Company and by the party against whom enforcement of the amendment, modification or discharge is sought. Any amendment, modification or discharge of this Agreement to be enforced against the New Stockholders shall be valid and binding with respect to all New Stockholders if such amendment, modification or discharge is executed by those New Stockholders holding a majority of the shares of Class A Common Stock issued to the New Stockholders in the Merger (including distributions of Securities with respect to such Securities and Securities acquired as a result of a stock split with respect to such Securities). 5.4 Limitation on Benefit; Parties It is the explicit intention of the parties hereto that no person or entity other than the parties hereto is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants, undertakings and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors, heirs, executors, administrators, legal representatives and permitted assigns. For purposes of this Agreement and notwithstanding any other provision hereof, a "party" to or of this Agreement shall be deemed to mean only those individuals or entities that have executed and delivered this Agreement. -13- 5.5 Binding Effect; Specific Performance This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, heirs, executors, administrators, legal representatives and permitted assigns. No party shall assign this Agreement without the written consent of the other parties hereto; and such consent shall not be unreasonably withheld. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. 5.6 Governing Law This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of Delaware (excluding the choice of law rules thereof). 5.7 Notices All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand-delivered or mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telecopy, facsimile transmission or telex, addressed as follows: (i) If to the Company or to the McLeods: McLeodUSA Incorporated McLeodUSA Technology Park 6400 C Street, SW, P.O. Box 3177 Cedar Rapids, IA 52406-3177 Attention: Randall Rings Facsimile: (319) 298-7901 (ii) If to IES: IES Investments Inc. 200 1st Street SE Cedar Rapids, IA 52401 Attention: James E. Hoffman Facsimile: (319) 398-4204 -14- (iii) If to Lumpkin or any CCI Shareholder: P.O. Box 1234 Mattoon, IL 61938 Attention: Richard A. Lumpkin Facsimile: (217) 234-9934 with a copy to : Schiff Hardin & Waite 6600 Sears Tower Chicago, Illinois 60606 Attention: David R. Hodgman, Esq. Facsimile: (312) 258-5600 (iv) If to the New Stockholders: c/o Media/Communications Partners III Limited Partnership 75 State Street Boston, Massachusetts 02109 Attention: James F. Wade Facsimile: (617) 345-7201 with a copy to: Edwards & Angell, LLP 101 Federal Street Boston, MA 02110 Attention: Stephen O. Meredith, Esq. Facsimile: (617) 439-4170 Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request or communication which shall be hand-delivered, mailed, transmitted, telecopied or telexed in the manner described above, or which shall be delivered to a telegraph company, shall be deemed sufficiently given, served, sent, received or delivered for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, or the answerback being deemed conclusive, but not exclusive, evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 5.8 Termination (a) This Agreement shall terminate and be of no further force or effect as to a 1998 Stockholder (and not as to the Company and the New -15- Stockholders) at such time as the 1998 Stockholders' Agreement shall terminate and be of no further force or effect with respect to such 1998 Stockholder. (b) If (i) during any Annual Period the Board of Directors has not provided the New Stockholders a reasonable opportunity to Transfer shares of Class A Common Stock pursuant to the registration of such shares under the Securities Act pursuant to Section 3.2 in an aggregate amount equal to not less than fifteen percent (15%) of the total number of shares of Class A Common Stock beneficially owned by the New Stockholders as of the Effective Date or (ii) after January 1, 2000, the 1998 Stockholders' Agreement has been terminated by all parties thereto, then the New Stockholders may terminate this Agreement by providing written notice of termination to all other parties (x) in the case of clause (b)(i) above, no later than thirty (30) days following the end of such Annual Period and (y) in the case of cause (b)(ii) above, at any time after January 1, 2000, such that all rights and obligations hereunder shall cease, and this Agreement shall be of no further force or effect. (c) Unless otherwise previously terminated by the New Stockholders pursuant to Section 5.8(b), this Agreement shall terminate on the earlier to occur of (i) the termination of the Merger Agreement in accordance with the terms thereof and (ii) the Expiration Date. (d) For purposes of this Section 5.8, the New Stockholders shall be deemed to be a single stockholder of the Company, and Lumpkin and all of the CCI Shareholders shall be deemed to be a single stockholder of the Company. 5.9 Publicity The New Stockholders will use their reasonable best efforts to consult with the Company prior to issuing any press release, making any filing with any governmental entity or national securities exchange or making any other public dissemination of information by the New Stockholders within which this Agreement or the contents hereof are referenced or described. 5.10 Appointment of Representative (a) Each of the New Stockholders hereby appoints Media/Communications Partners III Limited Partnership, with power of substitution, as its exclusive agent to act on its behalf with respect to any and all actions to be taken under or amendments or modifications to be made to this Agreement (the "M/C Representative"). The M/C Representative shall take, and the New Stockholders agree that the M/C Representative shall take, any and all actions which the M/C Representative believes are necessary or advisable under this Agreement for and on behalf of each of the New Stockholders, as fully as if each of -16- the New Stockholders was acting on its own behalf, including, without limitation, dealing with the Company and the other parties hereto with respect to all matters arising under this Agreement, entering into any amendment or modification to this Agreement deemed advisable by the M/C Representative and taking any and all other actions specified in or contemplated by this Agreement. The Company and the other parties hereto shall have the right to rely upon all actions taken or not taken by the M/C Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon each of the New Stockholders. (b) Each of the CCI Shareholders hereby appoints Lumpkin, with power of substitution, as its exclusive agent to act on its behalf with respect to any and all actions to be taken under or amendments or modifications to be made to this Agreement (the "CCI Representative"). The CCI Representative shall take, and the CCI Shareholders agree that the CCI Representative shall take, any and all actions which the CCI Representative believes are necessary or advisable under this Agreement for and on behalf of each of the CCI Shareholders, as fully as if each of the CCI Shareholders was acting on its own behalf, including, without limitation, dealing with the Company and the other parties hereto with respect to all matters arising under this Agreement, entering into any amendment or modification to this Agreement deemed advisable by the CCI Representative and taking any and all other actions specified in or contemplated by this Agreement. The Company and the other parties hereto shall have the right to rely upon all actions taken or not taken by the CCI Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon each of the CCI Shareholders. 5.11 Execution in Counterparts To facilitate execution, this Agreement may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto. It is the express understanding of the parties hereto that this Agreement shall be binding and enforceable with respect to the parties hereto on the terms herein set forth even if one or more of the CCI Shareholders do not sign this Agreement. -17- IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Stockholders' Agreement, or have caused this Stockholders' Agreement to be duly executed and delivered on their behalf, as of the day and year first hereinabove set forth. MCLEODUSA INCORPORATED By: /s/ J. Lyle Patrick Name: J. Lyle Patrick Title: Group Vice President, Chief Financial Officer and Treasurer M/C INVESTORS L.L.C. By: /s/ James F. Wade Name: James F. Wade Title: MEDIA/COMMUNICATIONS PARTNERS III LIMITED PARTNERSHIP By: M/C III L.L.C., its General Partner By: /s/ James F. Wade Name: James F. Wade Title: /s/ Clark E. McLeod /s/ Mary E. McLeod Clark E. McLeod Mary E. McLeod -18- /s/ Richard A. Lumpkin /s/ Gail G. Lumpkin Richard A. Lumpkin Gail G. Lumpkin IES INVESTMENTS INC. By: /s/ James E. Hoffman Name: James E. Hoffman Title: President Margaret Lumpkin Keon Trust Mary Lee Sparks Trust dated May 13, 1978 dated May 13, 1978 Margaret Lumpkin Keon, as Trustee Mary Lee Sparks, as Trustee Steven L. Grissom, as Trustee Mary Lee Sparks -19- The twelve trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989 one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks Bank One, Texas, N.A., Trustee By: The twelve trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks Bank One, Texas, N.A., Trustee By: -20- The three trusts established by Richard Adamson Lumpkin under Trust Agreement dated February 6, 1970, one for the benefit of each of: Richard Anthony Lumpkin, Margaret Anne Keon, and Mary Lee Sparks Bank One, Texas, N.A., Trustee By: The twelve 1990 Personal Income Trusts established by Margaret L. Keon, Mary Lee Sparks, and Richard A. Lumpkin, each dated April 20, 1990, one for the benefit of each of: Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks David R. Hodgman, Trustee Steven L. Grissom, Trustee -21- SCHEDULE I Gail G. Lumpkin Margaret Lumpkin Keon, as Trustee under the Margaret Lumpkin Keon Trust dated May 13, 1978 Mary Lee Sparks and Steven L. Grissom, as Trustees of the Mary Lee Sparks Trust dated May 13, 1978 Bank One, Texas, N.A., as Trustee of the twelve trusts created under the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks Bank One, Texas, N.A., as Trustee of the twelve trusts created under the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks Bank One, Texas, N.A., as Trustee of the three trusts established by Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, one for the benefit of each of Richard Anthony Lumpkin, Margaret Anne Keon, and Mary Lee Sparks David R. Hodgman and Steven L. Grissom, as Trustees of the twelve 1990 Personal Income Trusts established by Margaret L. Keon, Mary Lee Sparks, and Richard A. Lumpkin, each dated April 20, 1990, one for the benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks -----END PRIVACY-ENHANCED MESSAGE-----